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DECREE No

DECREE No. 43/2001/ND-CP OF AUGUST 1, 2001 PRESCRIBING THE FINANCIAL REGIME APPLICABLE TO INSURANCE ENTERPRISES AND INSURANCE BROKERAGE ENTERPRISES

THE GOVERNMENT

Pursuant to the Law on Organization of the Government of September 30, 1992;

Pursuant to the Law on Insurance Business of December 9, 2000;

At the proposal of the Minister of Finance,

DECREES:

Chapter I

GENERAL PROVISIONS

Article 1.- Scope of regulation

1. This Decree prescribes the financial regime applicable to insurance enterprises and insurance brokerage enterprises, which are established, organized and operate under the provisions of the Law on Insurance Business.

2. This Decree shall not apply to mutual support insurance organizations.

Article 2.- Financial management principles

Insurance enterprises and insurance brokerage enterprises shall enjoy financial autonomy, take self-responsibility for their own business operation results and fulfill their obligations and commitments according to the provisions of law.

Article 3.- State management agencies

The Finance Ministry shall perform the function of State management over finance, guide and inspect the observance of the financial regime by insurance enterprises and insurance brokerage enterprises according to the provisions of law.

Chapter II

MANAGEMENT AND USE OF CAPITAL AND ASSETS

Section 1. LEGAL CAPITAL, CHARTER CAPITAL, DEPOSITS AND MANAGEMENT

OF ASSETS

Article 4.- Legal capital

1. Legal capital levels of insurance enterprises:

a/ For non-life insurance business: VND 70,000,000,000 or USD 5,000,000;

b/ For life insurance business: VND 140,000,000,000 or USD 10,000,000.

2. The legal capital level of insurance brokerage enterprises: VND 4,000,000,000 or USD 300,000.

Article 5.- Charter capital

1. Charter capital of an insurance enterprise or insurance brokerage enterprise is the capital inscribed in such enterprise�s charter.

2. In the course of operation, insurance enterprises and insurance brokerage enterprises shall have to maintain the already contributed charter capital at a level not lower than the legal capital level prescribed in Article 4 of this Decree.

3. In cases where an insurance enterprise or insurance brokerage enterprise changes its charter capital already inscribed in its charter or where the transfer of shares of shareholders or contributed capital proportions of joint-venture parties accounts for 10% of the charter capital or more, such insurance enterprise or insurance brokerage enterprise shall have to file an application therefor and a written exposition to the Finance Ministry. Within 30 days after receiving the application and exposition, the Finance Ministry shall reply in writing on its approval or disapproval. In case of disapproval, the Finance Ministry shall have to explain the reasons therefor in writing.

4. Insurance enterprises and insurance brokerage enterprises, which had been established, organized and operating before the Insurance Business Law took effect, had their charter capital lower than the legal capital level prescribed in Article 4 of this Decree shall, within 3 years from the effective date of this Decree, have to fully supplement their charter capital according to regulations.

Article 6.- Deposits

1. Within 60 days after being granted the establishment and operation license, an insurance enterprise shall have to deposit part of its already contributed charter capital at a commercial bank operating in Vietnam. The deposit shall enjoy interest according to an agreement reached with the bank where such deposit is made.

2. The deposit level of an insurance enterprise shall be equal to 5% of its legal capital prescribed in Clause 1, Article 4 of this Decree.

3. Insurance enterprises may only use deposits to fulfill their commitments toward insurance purchasers when their solvency falls short and the Finance Ministry�s written consents thereto are obtained. Within 90 days after the deposits are used, insurance enterprises shall have to supplement the already used deposit amounts.

4. Insurance enterprises shall be entitled to withdraw the whole deposit amount upon the termination of their operation.

Article 7.- Other regulations on management of the use of capital and assets

Apart from the provisions of this Decree, insurance enterprises and insurance brokerage enterprises shall have to comply with the regulations on management of the use of capital and assets according to the relevant law provisions applicable to each type of enterprises.

Section 2. INSURANCE OPERATION RESERVES

Article 8.- Operation reserves for non-life insurance

1. Enterprises engaged in non-life insurance business shall have to deduct part of insurance premium of each insurance operation to set up operation reserve for their retained liability proportions.

2. Operation reserves include:

a/ Reserve for premiums not yet enjoyed, which shall be used to indemnify liability likely to arise in the valid duration of insurance contracts in subsequent years;

b/ Reserve for indemnities to unsettled claims, which shall be used to compensate for damage arising under insurance liability for which claims have not yet been made or have already been made but remain unsettled until the end of the fiscal year;

c/ Reserve for indemnities to great damage amplitudes, which shall be used to make compensations when a large damage amplitude occurs or a great damage is caused but the total insurance premium retained in the fiscal year after making deductions for setting up the reserve for premiums not yet enjoyed and the reserve for indemnities to unsettled claims is not enough to pay indemnity for the retained liability proportions of insurance enterprises.

Article 9.- Operation reserves for life insurance

1. Enterprises engaged in life insurance business shall have to deduct part of insurance premium of each insurance contract for setting up operation reserves for their retained liability proportions.

2. Operation reserves include:

a/ Mathematical reserve, which is the difference between the present value of insurance sum and the present value of insurance premiums to be collected in the future, and shall be used to pay insurance sum for already committed liabilities upon the occurrence of insurance events;

b/ Reserve for premiums not yet enjoyed, which is applicable to life insurance contracts with a term of under one year, and shall be used to pay insurance sums, which are likely to arise in the remaining valid duration of the insurance contracts in the subsequent year;

c/ Indemnity reserve, which shall be used to pay insurance sums when the insurance events occur but remain unsettled until the end of the fiscal year;

d/ Reserve for interest sharing, which shall be used to pay interests upon which insurance enterprises have agreed with insurance purchasers in insurance contracts;

e/ Reserve for ensuring balance, which shall be used to pay insurance sums when the insurance events occur due to big changes in mortality rates and/or technical interest rates.

Article 10.- Levels and methods of deduction for setting up operation reserves

The Finance Ministry shall specify the level and method of deduction for setting up operation reserve for each insurance operation prescribed in Articles 8 and 9 of this Decree.

Section 3. CAPITAL INVESTMENT

Article 11.- Investment capital sources

Investment capital sources of an insurance enterprise include:

1. Charter capital;

2. Compulsory reserve fund;

3. Voluntary reserve fund;

4. Unused interest amounts of previous years and funds used for investment, which are formed from its retained profit;

5. Idle capital source from insurance operation reserve.

Article 12.- Idle capital source from insurance operation reserve

1. Idle capital source from insurance operation reserve of an insurance enterprise is the total insurance operation reserve minus amounts used by such insurance enterprise to pay regular insurance indemnities in a period, for non-life insurance, or pay regular insurance sums in a period, for life insurance.

2. Money amounts used by a non-life insurance business enterprise to pay regular insurance indemnities in a period shall not be lower than 25% of the total insurance operation reserve and may be deposited at credit institutions operating in Vietnam.

3. Money amounts used by a life insurance business enterprise to pay regular insurance sums in a period shall not be lower than 5% of the total insurance operation reserve and may be deposited at credit institutions operating in Vietnam.

Article 13.- Investment of idle capital from insurance operation reserve

1. Idle capital from insurance operation reserve of an insurance enterprise as defined in Clause 1, Article 12 of this Decree shall only be invested in Vietnam in the following fields:

a/ For enterprises engaged in non-life insurance business:

- Purchase of Government bonds and/or enterprise bonds with underwriting, deposits at credit institutions with unlimited amounts;

- Purchase of enterprise shares and/or bonds without underwriting, capital contribution to other enterprises with 35% of idle capital from insurance operation reserve at most;

- Real estate business, loan provision, entrusted investment through financial-credit organizations, with 20% of idle capital from insurance professional operation reserve at most.

b/ For enterprises engaged in life insurance business:

- Purchase of Government bonds and/or enterprise bonds with underwriting, deposits at credit institutions with unlimited amounts;

- Purchase of enterprise shares and/or bonds without underwriting, capital contribution to other enterprises with 50% of idle capital from insurance operation reserve at most;

- Real estate business, loan provision, entrusted investment through financial-credit organizations with 40% of idle capital from insurance professional operation reserve at most.

2. Insurance enterprises, which had been established before the effective date of the Insurance Business Law and have made investment at rates higher than those prescribed in Clause 1 of this Article, shall, within one year from the effective date of this Decree, have to readjust such rates as appropriate.

3. The investment from capital sources defined in Clauses 1, 2, 3 and 4, Article 11 of this Decree shall be made according to the provisions of law.

Chapter III

SOLVENCY AND RESTORATION THEREOF

Article 14.- Solvency

1. Insurance enterprises shall have to maintain their solvency throughout the course of insurance business operation.

2. Insurance enterprises shall be considered solvent when they fully make deductions for setting up insurance operation reserves and have a solvency amplitude not lower than the minimum solvency amplitude prescribed in Article 15 of this Decree.

Article 15.- Minimum solvency amplitude

1. The minimum solvency amplitude of a non-life insurance business enterprise shall be equal to 20% of the total premium amount actually retained at the time of determining its solvency amplitude.

2. The minimum solvency amplitude of a life insurance business enterprise:

a/ For life insurance contracts with a term of 10 years or less, it shall be equal to 4% of the insurance operation reserve plus 0.1% of the insurance sum at risk;

b/ For life insurance contracts with a term of over 10 years, it shall be equal to 4% of the insurance operation reserve plus 0.3% of the insurance sum at risk.

Article 16.- The solvency amplitude of insurance enterprises

1. The solvency amplitude of a non-life insurance enterprise shall be calculated on the basis of capital source for determining solvency amplitude divided by the total insurance premium corresponding to the liability proportion actually retained at the time of determining solvency amplitude.

2. The solvency amplitude of a life insurance enterprise shall be calculated on the basis of capital source for determining solvency amplitude divided by the total insurance operation reserve and the insurance sum at risk at the time of determining the solvency amplitude.

3. The capital source of an insurance enterprise for determining the solvency amplitude is its own capital source minus its capital contributions for establishing other insurance enterprises and irrecoverable debts.

Article 17.- Danger of insolvency

Insurance enterprises shall be considered being in danger of insolvency when the amplitude of their solvency is lower than the minimum solvency amplitude.

Article 18.- Plans for solvency restoration

1. When facing the danger of insolvency, an insurance enterprise shall have to immediately report to the Finance Ministry on its real financial status, cause(s) leading to the danger of insolvency as well as plans for solvency restoration, including the following measures:

a/ Plan for supplement of its own capital source;

b/ Plan for reinsurance; narrowing of operation contents and scope;

c/ Plan for consolidation of organizational structure and expected change of its Managing Board�s Chairman and/or its General Director (Director);

d/ Plan for transfer of insurance contract(s);

e/ Other measures.

2. Within 15 days after receiving the enterprise�s report, the Finance Ministry shall decide on the implementation of the solvency restoration plans.

3. Within 90 days after the Finance Ministry decides on the implementation of the solvency restoration plans, if the insurance enterprise still fails to restore its solvency as prescribed, it shall be put into the state of the special control. The Finance Ministry shall decide to set up the solvency control board to apply solvency restoration measures according to the provisions of Article 80 of the Insurance Business Law.

Chapter IV

TURNOVER AND EXPENSES

Section 1. TURNOVER AND EXPENSES OF INSURANCE ENTERPRISES

Article 19.- Turnover of insurance enterprises

Turnover of an insurance enterprise is the collectible amount of money arising in a period and includes:

1. Turnover from insurance business activities, which is the collectible amount arising in a period after subtracting payable amounts for reducing revenues arising in a period.

a/ The collectible amounts arising in a period include:

- Original insurance premium;

- Re-insurance undertaking charge;

- Re-insurance ceding commission;

- Charges for agency services, including: damage assessment, consideration for indemnity payment, request for the third party�s compensation, handling of cargo eligible for 100% indemnity;

- Damage assessment charge, excluding free-of-charge assessment among internal cost-accounting member units of the same independent cost-accounting insurance enterprise.

b/ Payable amounts for reducing revenues arising in a period include:

- Refunded insurance premium;

- Reduced insurance premium;

- Re-insurance assignment charge;

- Refunded re-insurance undertaking charge;

- Reduced re-insurance undertaking charge;

- Refunded re-insurance ceding commission;

- Reduced re-insurance ceding commission.

2. Turnover from financial activities:

a/ Revenue from investment activities as defined in Section 3, Chapter II of this Decree;

b/ Revenue from securities purchasing and selling activities;

c/ Revenue being interest on deposits;

d/ Revenue from asset leasing;

e/ Re-entried balance of securities price decrease reserve;

f/ Other revenues as prescribed by law.

3. Revenues from other activities:

a/ Proceeds from the assignment, sale and/or liquidation of fixed assets;

b/ Bad debts, which have been written off but are now recovered;

c/ Fines for contract breaches;

d/ Other revenues as prescribed by law.

Article 20.- Expenses of insurance enterprises

Expenses of an insurance enterprise are payable and deductible amounts arising in a period, including:

1. Insurance business expenses, which are payable and/or deductible amounts arising in a period, after subtracting collectible amounts for purpose of reducing expenses arising in such period.

a/ Payable and deductible amounts arising in a period include:

- Original insurance indemnities for non-life insurance, or insurance sums for life insurance;

- Re-insurance indemnities;

- Deductions for setting up operation reserves;

- Insurance commission;

- Damage assessment expense;

- Charges for agency services, including damage assessment, consideration for payment of indemnities, claim for compensations by the third party;

- Expense for handling of cargo subject to 100% indemnity;

- Expense for management of insurance agents;

- Expense for risk and damage prevention and minimization;

- Expense for assessment of risks of the insured;

- Wage, remuneration, bonus, severance and amounts of wage and remuneration character as provided for by law for each type of enterprises;

- Payable social insurance and medical insurance premiums as prescribed by law;

- Other expenses as prescribed by law for each type of enterprise.

b/ Amounts, which must be collected to reduce expenses arising in a period, including:

- Re-insurance ceding indemnity;

- Compensations from the third party under claims;

- Proceeds from the handling of cargo subject to 100% indemnity.

2. Expenses for financial activities:

a/ Expenses for investment activities according to the provisions of Section 3, Chapter II of this Decree;

b/ Interests to be paid to life insurance policy holders;

c/ Asset leasing expenses;

d/ Banking fees, loan interests;

e/ Deductions for setting up securities price decrease reserve;

f/ Other expenses as prescribed by law.

3. Expenses for other activities:

a/ Expenses for assignment, sale and/or liquidation of fixed assets;

b/ Expenses for recovery of bad debts, which have been written off but are now recovered;

c/ Expenses paid as fines for contract breaches;

d/ Other expenses as prescribed by law.

Article 21.- Excluded expenses

Insurance enterprises shall not be allowed to account into their expenses the following:

1. Fines that must be paid by collectives or individuals for their law violations;

2. Expenses for capital construction investment, fixed asset procurement, hard-life allowances for laborers and financial support for organizations and individuals as prescribed by law for each type of enterprise;

3. Public-service expenses, rewards, welfare allowances, regular and irregular hard-life allowances and other expenses covered by other funding sources;

4. Other unreasonable expenses as prescribed by law.

Section 2. TURNOVER AND EXPENSES OF INSURANCE BROKERAGE ENTERPRISES

Article 22.- Turnover of insurance brokerage enterprises

Turnover of an insurance enterprise is the collectible amount of money arising in a period and includes:

1. Turnover from insurance brokerage activities:

a/ Insurance brokerage commissions, after subtracting reimbursed or reduced insurance brokerage commission amounts;

b/ Other revenues as prescribed by law.

2. Turnover from financial activities:

a/ Turnover from securities purchasing and selling activities;

b/ Interests on deposits, interests on loans;

c/ Asset rental;

d/ Re-entried balance of securities price decrease reserve;

e/ Other revenues as specified by law.

3. Income from other activities:

a/ Proceeds from the assignment, sale and/or liquidation of fixed assets;

b/ Bad debts, which have been written off but are now recovered;

c/ Fines for contract breaches;

d/ Other revenues as prescribed by law.

Article 23.- Expenses of insurance brokerage enterprises

Expenses of an insurance brokerage enterprise are payable amounts arising in a period, including:

1. Expenses for insurance brokerage activities:

a/ Expense for insurance brokerage activities;

b/ Expense for purchase of occupational liability insurance;

c/ Wage, remuneration, bonus, severance and amounts of wage and remuneration character as provided for by law for each type of enterprise;

d/ Payable social insurance and medical insurance premiums as prescribed by law;

e/ Other expenses as prescribed by law for each type of enterprise.

2. Expenses for financial activities:

a/ Asset leasing expenses;

b/ Banking fees, loan interests;

c/ Deductions for setting up securities price decrease reserve;

d/ Other expenses as prescribed by law.

3. Expenses for other activities:

a/ Expenses for assignment, sale and/or liquidation of fixed assets;

b/ Expenses for recovery of bad debts, which have been written off but are now recovered;

c/ Expenses paid as fines for contract breaches;

d/ Other expenses as prescribed by law.

Article 24.- Excluded expenses

Insurance brokerage enterprises shall not be allowed to account into their business operation expenses those specified in Article 21 of this Decree.

Chapter V

PROFIT AND PROFIT DISTRIBUTION

Article 25.- Profit of insurance enterprises

1. Profit actually earned in a year is the business result of an insurance enterprise, including profit from insurance business activities, profit from financial activities and profit from other activities.

2. Profit of an insurance enterprise is the difference determined between the total turnover and the total expenses of such insurance enterprise.

Article 26.- Profit of insurance brokerage enterprises

1. Profit actually earned in a year is the business result of an insurance brokerage enterprise, including profit from insurance brokerage business activities, profit from financial activities and profit from other activities.

2. Profit of an insurance brokerage enterprise is the difference determined between the total turnover and the total expenses of such insurance brokerage enterprise.

Article 27.- Obligations toward the State budget

Insurance enterprises and insurance brokerage enterprises shall have to fulfill their obligations toward the State budget according to the provisions of law.

Article 28.- Profit distribution

After paying enterprise income tax as prescribed by law and making deductions for setting up the compulsory reserve fund, insurance enterprises and insurance brokerage enterprises shall be entitled to distribute the remaining profit according to the provisions of law.

Article 29.- The compulsory reserve fund

Insurance enterprises and insurance brokerage enterprises shall have to deduct 5% of their annual after-tax profit for setting up the compulsory reserve fund. The maximum level of the compulsory reserve fund shall be equal to 10% of the enterprise�s charter capital.

Chapter VI

ACCOUNTING, STATISTICAL AND AUDITING REGIMES AND FINANCIAL REPORTS

Article 30.- Accounting regime

Insurance enterprises and insurance brokerage enterprises shall have to make full inscriptions on initial vouchers, update accounting books and reflect their economic and financial activities in a comprehensive, prompt, truthful, accurate and objective manner.

Article 31.- Fiscal year

A fiscal year of an insurance enterprise or insurance brokerage enterprise starts on January 1 and ends on December 31 of the same calendar year. The first fiscal year of an insurance enterprise or insurance brokerage enterprise starts on the date it is granted the establishment and operation license and ends on the last day of the same year.

Article 32.- Financial reports

1. Insurance enterprises and insurance brokerage enterprises shall have to make and send their financial reports, statistical reports, periodical and extraordinary professional operation reports according to the provisions of the current laws and the Finance Ministry�s guidance.

2. Annual financial reports of insurance enterprises and insurance brokerage enterprises must be audited and certified by independent auditing organizations lawfully operating in Vietnam before being submitted to the Finance Ministry.

3. Besides reports prescribed in Clauses 1 and 2 of this Article, foreign-invested insurance enterprises and insurance brokerage enterprises shall, within 180 days after the end of a fiscal year, have to send their annual financial reports of foreign insurance enterprises and foreign insurance brokerage enterprises to the Finance Ministry.

Article 33.- Publicizing financial reports

Within 120 days after the end of a fiscal year, insurance enterprises and insurance brokerage enterprises shall have to publicize their financial reports according to the provisions of law.

Article 34.- Financial examination and inspection

The Finance Ministry shall conduct the examination and inspection of the observance of the financial regime by insurance enterprises and insurance brokerage enterprises.

Chapter VII

IMPLEMENTATION PROVISIONS

Article 35.- Effect of this Decree

1. This Decree takes effect 15 days after its signing.

2. All previous regulations on the financial regime applicable to insurance enterprises and insurance brokerage enterprises shall cease to be effective as from the effective date of this Decree.

Article 36.- Organization of implementation

1. The Finance Minister shall guide the implementation of this Decree.

2. The ministers, the heads of the ministerial-level agencies, the heads of the agencies attached to the Government and the presidents of the provinces and centrally-run cities shall have to implement this Decree.

On behalf of the Government

Prime Minister
PHAN VAN KHAI